Tuesday, March 23, 2010

Whiting Plans Significant Three Forks Wildcats, NW Stark Co.

After recently receiving approval for establishing numerous drilling units in the area, Whiting Pet. has wasted little time announcing exploration plans targeting the Three Forks Formation ("TF") in NW Stark Co., near the town of Belfield. In the past week, Whiting has permitted two TF wildcats, one in a standup 1280 in secs. 13 & 24, T140, R99, about four miles NE of Belfield. Another test is apparently planned six miles directly west in the same township.

The second permit is in a laydown 1280 about a mile south of Belfield in secs. 8 & 9, T139, R99. This is the only laydown configured unit in the area, apparently established in this manner because the city of Belield lies in the two adjoining sections to the north. Both wells are configured with a NW/SE trending lateral.

These significant tests are about twenty miles SE of where Whiting has had good success in exploiting the TF in their Lewis and Clark Prospect in the limited number of wells drilled, of which the current projects appear to be an extension. This area is near the southern depositional edge of the Bakken shales, where the lower shale is virtually nonexistent and the upper shale is very thin. Whiting plans to set the lateral about 20 ft. below the top of the TF, and the top of the TF lies appx. 15 below the top of the upper Bakken Shale.

Though Continential and others had marginal success developing the Mid-Bakken in the area to the north in southern Billings Co. in the 2005-06 era, this area has largely been dormant since that time. The closest TF production is from the Whiting Lewis and Clark Prospect wells to the NW. As shown in the slide from Whiting's corp. presentation, the company plans to have three rigs running in the L&C prospect area by year end.

Given that Whiting has not requested tight hole status with the drilling permits, and will likely request such status later before the wells begin producing, it may be quite awhile before actual production info is released (assuming the company does not issue a press release soon after production is established -- assuming it is established). It probably goes without saying, but any Whiting success here has the potential to open a large untested area on the southern limit of the Bakken to extensive development in the TF where mid-Bakken potential appears highly speculative at best.

TransCanada Changes Tune About Rerouting Pipeline That Will Carry Crude From The Bakken

I was originally very upset when the Obama Administration came out with the mandate that TransCanada reroute its pipeline out of environmentally sensitive areas of Nebraska. My main issue was because of the affect it could have on development in The Bakken. However, after the latest news from the CEO of TransCanada, it appears the delay is now a good thing.

Most people don’t realize that the majority of the steel for this pipeline is already on the ground in the United States – rusting. TC says they can start the building of the southern portion, from Cushing, OK to the Gulf Coast with shipper commitment and regulator approval. TC also says that the delay will allow them to generate enough cash flow to finance the project internally. Hopefully this means the shippers will eventually get reduced rates, which will decrease differentials and increase oil prices at the Wellhead! Although that is an optimistic outlook and could provide more tax revenue for the States if the differentials were reduced, it is not likely.

I guess I still don’t understand why TC is portraying this as a positive thing. If it’s so positive, why didn’t they delay it long enough in the first place to generate enough internal cash flow? I am not close enough to the issues in Nebraska to fully understand the potential enivornmental impact – I just know that pipelines are a very safe means of transporting bulk liquids and are needed to ensure an adequate supply of energy. In the mean time, the crude by rail concept will flourish and can hopefully provide enough reliable takeaway options for continued development of The Bakken.